Shareholders of Veoneer, Inc. (NYSE:VNE) will be pleased this week, given that the stock price is up 14% to US$14.82 following its latest yearly results. The statutory results were mixed overall, with revenues of US$1.9b in line with analyst forecasts, but losses of US$4.92 per share, some 4.7% larger than analysts were predicting. This is an important time for investors, as they can track a company’s performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. Readers will be glad to know we’ve aggregated the latest statutory forecasts to see whether analysts have changed their mind on Veoneer after the latest results.
Following the recent earnings report, the consensus from20 analysts covering Veoneer expects revenues of US$1.78b in 2020, implying a discernible 6.6% decline in sales compared to the last 12 months. Per-share statutory losses are expected to explode, reaching US$3.75 per share. Yet prior to the latest earnings, analysts had been forecasting revenues of US$1.97b and losses of US$3.82 per share in 2020. Although analysts have lowered their sales forecasts, they’ve also made a their earnings per share estimates, which implies there’s been something of an uptick in sentiment following the latest results.
There was no real change to the average analyst price target of US$17.47, suggesting that the revisions to revenue estimates are not expected to have a long-term impact on Veoneer’s valuation.’ Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company’s valuation. Currently, the most bullish analyst values Veoneer at US$26.00 per share, while the most bearish prices it at US$13.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. Over the past three years, revenues have declined around 5.9% annually. On the bright side, analysts expect the decline to level off somewhat, with the forecast for a 6.6% decline in revenue next year. Compare this against analyst estimates for companies in the wider market, which suggest that revenues (in aggregate) are expected to decline 4.6% next year. So while it’s not great to see that analysts are expecting a decline, at least Veoneer is forecast to shrink at a slower rate than the wider market.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for next year. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider market. The consensus price target held steady at US$17.47, with the latest estimates not enough to have an impact on analysts’ estimated valuations.
Still, the long-term prospects of the business are much more relevant than next year’s earnings. We have forecasts for Veoneer going out to 2024, and you can see them free on our platform here.
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